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Liability insurance does not continue Ad Infinitum



Consumers Insurance USA (“Consumers”) sought a declaratory judgment that it had no obligation to insure, defend or indemnify the defendants Huntleigh Dealership Services, Inc., and Huntleigh Bus Sales, Inc. (collectively, “Huntleigh”) for any claims . or causes of action arising from a motor vehicle accident in May 2017 (the “accident”). Huntleigh opposed the consumer interpretation, arguing that it was subject to the conditions set out in Policy No. AD 29160359-4 (the “Policy”), as well as the subsequent renewal policy.

IN Consumers Insurance USA v. Huntleigh Dealership Services, Inc. et al., Civil Action No. 19-1853, United States District Court, ED Pennsylvania (May 5, 2022) an accident involving one vehicle sold to another in an accident two years after the expiration of an insurance policy that the seller sought coverage from the expired insurance.

BACKGROUND

Huntleigh is in the business of buying and selling new and used buses. It sought insurance for its business from consumers who issued a “garage policy” to Huntleigh, which insured Huntleigh’s “garage business,” including its stock of unsold buses. The policy contained, in the relevant part, the following clauses:

The insurance was valid from November 30, 2014 to November 30, 2016. After the end of the insurance, consumers no longer insured Huntleigh in any property.

In 2015, while the policy was still in effect, Huntleigh sold a school bus to FKW, Inc., a / k / a Werner Bus Lines (hereinafter referred to as “Werner”). Huntleigh transferred the title of the bus to Werner, which operates a charter bus business in the Philadelphia area.

Almost two years later, Werner entered into an agreement with the Philadelphia School District to provide Charles W. Henry Elementary School with a charter bus for an 8thth study visit to Washington DC Werner was in charge of the bus and an employed driver. When the bus was traveling on Interstate 95 in Maryland, the bus was involved in an accident in which all children and adults on board were injured.

As a result, at least seventeen of the passengers applied to the Philadelphia Court of Common Pleas and claimed damages for personal injury resulting from the bus accident. In this case, the plaintiffs allege theories that sound in product liability (strict liability, negligent product liability, breach of warranty) against Huntleigh. In particular, the allegations against Huntleigh include allegations that they sold a defective product to Werner in 2015 because the bus did not have any seat belts and the windows were incorrectly laminated.

In response to Huntleigh’s claim about the accident, consumers denied coverage. Consumers stated that the allegations against Huntleigh did not describe the operation, maintenance or use of a covered car in Huntleigh’s garage business, as the bus was sold to Werner more than two years before the accident occurred and therefore occurred outside the insurance period.

Consumers demanded a summary judgment. Huntleigh submitted a response to the consumer’s request and his own request for a summary judgment.

DISCUSSION

In this case, the USDC was accused of interpreting the language of the required insurance and determining whether coverage is provided based on the specific facts presented. Pennsylvania and Missouri share similar laws regarding the interpretation of insurance contracts. T

Missouri courts make a similar analysis as Pennsylvania courts. Missouri courts are required to interpret and enforce an insurance policy as it is written, not to rewrite the agreement. As in Pennsylvania, the court must not unreasonably distort language in a policy or exercise ingenuity in order to create ambiguity when no one exists.

An event, for the purpose of insurance contract, occurs when the harmful effects of the negligence first appear in such a way that a reasonable person would become aware of the damage. An event does not take place at the time when the alleged wrongful act was committed, but is the time when the complaining party was actually injured. Based on the above, there is no conflict of law as to whether an event under an insurance policy has taken place, as both jurisdictions agree that an event did not occur when the event occurs, but when its effects are obvious.

The insurance does not cover the defendant’s claims

Consumers claimed that Huntleigh was not covered by the policy because Huntleigh did not “own, maintain or use” the bus listed in the policy. Since the bus was sold by Huntleigh to Werner in April 2015, Huntleigh did not own, maintain or use the bus in any way at the time of the accident in May 2017. Consumers logically claimed that the accident occurred after the policy expired.

As a threshold issue, the USDC concluded that the policy was an event-based policy. An “occurrence” policy protects the policyholder from liability for all actions taken while the insurance is in effect. Given the unambiguous language used by the policy and considered in its entirety, the policy is a “presence” policy.

It is clear, based on unambiguous language, that only qualifying events that occur during the coverage period are covered. The insurance specifically focuses on the damage that causes the damage that “triggers” the coverage and specifically requires that this damage occur during the applicable insurance period.

As the accident occurred outside the relevant insurance period, the USDC concluded that coverage should be denied. Huntleigh had no effective consumer policy at the time of the May 15, 2017 accident.

Huntleigh could not have “used” the bus at the time of the accident when Huntleigh neither owned nor operated the bus, nor did he employ the driver responsible for the accident.

Consumers and Huntleigh entered into a compensation agreement for events that occurred over a period of time, which is common in the insurance industry. By trying to turn the term “use” into an unbounded carrier of unspecified liability, Huntleigh turned a blind eye to other logical parts of the policy that clearly set limits on coverage.

Insurance coverage does not extend in infinityand more specifically ceased before the day of the accident.

Therefore, the consumer’s request for a summary judgment was granted and Huntleigh’s request for a summary judgment was rejected.

An “event” insurance policy provides compensation and defense to an insured person for an accident that occurs while the insurance was in force. No one was injured as a result of the sale of the bus in question two years before the accident. Therefore, there can be no coverage for defense or compensation to an insured for a loss that occurred two years after the end of the insurance.


(c) 2022 Barry Zalma & ClaimSchool, Inc.

Barry Zalma, Esq., CFE, now limits his internship to the position of insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as a lawyer for insurance coverage and claims management and more than 54 years in the insurance industry. He is available at http://www.zalma.com and zalma@zalma.com.

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